Pandora Manufacturing has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million and a coupon rate of 10 percent and sells for 96 percent of par. The second issue has a face value of $50 million and a coupon rate of 11 percent and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights?
Pandora Manufacturing has 9 million shares of common stock outstanding. The current share price is $81, and the book value per share is $8. The company also has two bond issues outstanding. The first bond issue has a face value of $80 million and a coupon rate of 10 percent and sells for 96 percent of par. The second issue has a face value of $50 million and a coupon rate of 11 percent and sells for 104 percent of par. The first issue matures in 25 years, the second in 8 years. a. What are the company's capital structure weights on a book value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) b. What are the company's capital structure weights on a market value basis? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. Which are more relevant, the book or market value weights?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Pandora Manufacturing has 9 million shares of common stock outstanding. The current
share price is $81, and the book value per share is $8. The company also has two bond
issues outstanding. The first bond issue has a face value of $80 million and a coupon
rate of 10 percent and sells for 96 percent of par. The second issue has a face value of
$50 million and a coupon rate of 11 percent and sells for 104 percent of par. The first
issue matures in 25 years, the second in 8 years.
a. What are the company's capital structure weights on a book value basis? (Do not
round intermediate calculations and round your answers to 4 decimal places, e.g.,
.1616.)
b. What are the company's capital structure weights on a market value basis? (Do not
round intermediate calculations and round your answers to 4 decimal places, e.g.,
.1616.)
c. Which are more relevant, the book or market value weights?
a.
Equity/Value
Debt/Value
b. Equity/Value
Debt/Value
More relevant
C.
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